## Facts

- Lloydona Peters Enterprises, Inc. (LPE) was a closely held family corporation formed to hold inherited real property; each of four sisters held equal stock and served as directors and officers.
- One sister, DeLoris Dorius, and her husband purchased an office building; LPE agreed to pay a portion of the purchase price while title was taken in the Doriuses’ names.
- LPE alleged escrow documents reflected the Doriuses’ agreement to convey to LPE an undivided one-half interest in the building upon final payment.
- LPE and the Doriuses made approximately equal payments toward the building over time.
- As the purchase neared completion, the board resolved to obtain appraisals and then meet to determine a price for a possible buyout of LPE’s asserted one-half interest, with an expressed intent to consult all directors before a final decision.
- After appraisals, the Doriuses tendered a $14,000 check to LPE’s treasurer, purportedly representing the value of LPE’s one-half interest using the higher appraisal.
- At a later directors’ meeting, all directors accepted the appraisal as valid, but only some directors supported selling at the tendered price; two remained undecided.
- LPE alleged the treasurer deposited the $14,000 check despite the unresolved position of two directors.
- LPE’s president, Jean P. Hull, initiated a lawsuit seeking specific performance to compel conveyance of an undivided one-half interest in the building, without a prior authorizing resolution by a majority of the board.

## Issues

1. Whether a corporate president of a closely held corporation has actual, implied, or apparent authority to initiate significant litigation, retain counsel, and expend corporate funds without prior authorization by a majority of the board of directors.
2. Whether subsequent actions or acquiescence by some directors constituted ratification of the president’s unauthorized initiation of the lawsuit.

## Decision

- The Utah Supreme Court affirmed dismissal of LPE’s complaint.
- The court held the president lacked actual or implied authority to commence the action on the corporation’s behalf without board authorization.
- The court held the record did not show ratification by a knowledgeable majority of the board.
- Because the suit was not properly authorized or ratified, it could not proceed as a corporate action.

## Legal Principles

- Authority to manage corporate affairs and bind the corporation rests with the board of directors, not individual officers acting independently.
- A corporate president does not, by virtue of office alone, possess implied authority to initiate extraordinary acts such as substantial litigation, retain counsel for such litigation, or commit significant corporate funds absent board approval.
- Ratification of an unauthorized corporate act requires affirmative approval by a majority of directors with knowledge of the material facts; inaction, informal acquiescence, or support by fewer than a majority is insufficient.
- In closely held corporations with internal conflicts, courts require clear proof of valid majority-board authorization or ratification before treating litigation as properly instituted by the corporation.

## Conclusion

The court held that initiating major litigation to enforce claimed real property rights is a board-level decision, not within a president’s inherent authority, and that LPE failed to show a knowledgeable majority of directors authorized or ratified the lawsuit; dismissal was therefore affirmed.


Lloydona Peters Enters., Inc. v. Dorius, 658 P.2d 1209 (Utah 1983)